High Court of KeralaSingle Judge2014-12-17Writ petition disposed of in line with the Divi...

South Travancore Distilleries and Allied Products v. State of Kerala and Others

Case / Petition Number:WP(C).NO. 31659 OF 2008 (R)

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: A.K. Jayasankaran Nambiar
Judgment Date: 2014-12-17
Court Decision / Holding: Writ petition disposed of; the Court follows the Division Bench judgment dated 22.01.2010 in W.A.No.1225 of 2007 and connected cases, upholding the amendments to the Kerala General Sales Tax Act and Abkari Act except for the retrospective effect prior to 05.01.1999; the petition challenges are disposed accordingly.
Final Disposition: Writ petition disposed of in line with the Division Bench decision in W.A.No.1225 of 2007 and connected cases; amendments to KGST Act and Abkari Act upheld, except for retroactive effect prior to 05.01.1999.

Parties to the Case

Appellants / Petitioners

South Travancore Distilleries and Allied Products, Maruthoor, Neyyattinkara, Thiruvananthapuram

Respondents

State of Kerala represented by the Secretary to Government, Taxes (B), Department Secretariat, Thiruvananthapuram
The Commissioner of Commercial Taxes, Thiruvananthapuram
The Dy. Commissioner of Appeals, Thiruvananthapuram
The Asst. Commissioner (Assessment) Special Circle, Thiruvananthapuram
Kerala State Beverages (Manufacturing and Marketing) Corporation Limited, SASTHA GROUP OFFICE COMPLEX, SASTAMANGALAM, Thiruvananthapuram

Legal Representation & Advocates

Counsels for Petitioners

• A. Kumar

Counsels for Respondents

• C.S. Ajith Prakash
• Elvin Peter
• K.T. Lilly

Case Synopsis & Summary

The petitioner, a registered dealer engaged in compounding, blending and bottling of Indian Made Foreign Liquor (IMFL), challenges the liability to turnover tax on that portion of its turnover which includes excise duty/privilege price in respect of IMFL sales. It argues it cannot be treated as a distillery for purposes of Section 5(2C) of the Kerala General Sales Tax Act and hence should not be liable to turnover tax. A further contention concerns payments already made during the pendency of litigation about whether privilege-price collections by the Kerala State Beverages Corporation form part of the turnover; the Supreme Court decision in State of Kerala and Others v. Maharashtra Distilleries Ltd. (2005 Vol. 141 STC 358) and a clarifying note held that no turnover tax would be payable on privilege-fee payments up to 05.01.1999. Respondents allegedly appropriated such payments toward interest under Sections 23(3) and 23(3A) with a separate provision under Section 55C, leading to adjustments and limited set-off for post-05.01.1999 liability. The petitioner also contends that compounding and blending activities do not amount to manufacture. The assessment orders for 2000-01 to 2002-03 (Exts. P11, P17, P20) are challenged along with amendments to the KGST Act and Abkari Act (2003/04). The Division Bench judgment in W.A.No.1225 of 2007 upheld the amendments; accordingly, the High Court disposes of the petition following that decision.

Provisions of Law Cited

Kerala General Sales Tax Act, Sec. 5(2C)Kerala General Sales Tax Act, Sec. 45AKerala General Sales Tax Act, Sec. 23(3)Kerala General Sales Tax Act, Sec. 23(3A)Kerala General Sales Tax Act, Sec. 55C

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner contends it is not a distillery under Section 5(2C) of the KGST Act and thus not liable to turnover tax. It also argues that amounts paid during the pendency of litigation regarding privilege-fee collections should be addressed as non-tax or offset against liability, citing the Supreme Court decision in State of Kerala v. Maharashtra Distilleries Ltd. and the subsequent clarification that no turnover tax is payable on privilege-fee payments up to 05.01.1999; it challenges the amendments to the KGST Act and Abkari Act as enacted in 2003/04. It also maintains that compounding and blending do not constitute manufacture for turnover tax purposes. The petition seeks to quash assessment orders (Exts. P11, P17, P20) to the extent they impose turnover tax. Respondents

Contentions of Respondents

The respondents rely on the statutory framework and the amendments to the KGST Act and Abkari Act (2003/04) to demand turnover tax on the petitioner’s turnover post-1999. They urge that the privilege-fee payments were properly handled and, where applicable, adjusted against interest payable under Sections 23(3)/(3A) and 55C. They contend that the assessments (Exts. P11, P17, P20) were proper and that statutory remedies pursued by the petitioner (revisions) align with the law and have culminated in the 2010 Division Bench decision upholding amendments except for retroactive effects prior to 05.01.1999; the writ petition should be disposed in accordance with that ruling.

Cited Precedents (2)

Case Name	Citation	Treatment	Explanation
State of Kerala and Others v. Maharashtra Distilleries Ltd. and Others	2005 Vol.141 STC 358	Positive	Supreme Court decision clarifying that no turnover tax would be payable on privilege-fee payments up to 05.01.1999.
W.A.No.1225 of 2007 and connected cases	W.A.No.1225 of 2007	Positive	Division Bench upholding the amendments to the KGST Act and Abkari Act; present petition disposed following this decision.

Diagnostic Tool

Beta

Does this judgment govern your specific facts?

Don't risk relying on a distinguishable precedent. Enter your facts or proposition below. We will test it against South Travancore Distilleries and Allied Products v. State of Kerala and Others and instantly map out authorities that support, challenge, or govern your position.

Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **WEDNESDAY, THE 17TH DAY OF DECEMBER 2014/26TH AGRAHAYANA, 1936** **WP(C).NO. 31659 OF 2008 (R) ----------------------------** **PETITIONER(S):** **---------------** **SOUTH TRAVANCORE DISTILLERIES AND ALLIED PRODUCTS, MARUTHOOR, NEYYATTINKARA THIRUVANANTHAPURAM, REPRESENTED BY ITS WORKS MANAGER SRI.GIRISH GOPAL.** **BY ADV. SRI.A.KUMAR** **RESPONDENT(S):** - **---------------** **1. STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES (B), DEPARTMENT SECRETARIAT, THIRUVANANTHAPURAM.** **2. THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM** **3. THE DY.COMMISSIOENR OF APPEALS THIRUVANANTHAPURAM.** **4. THE ASST. COMMISSIONER (ASSMT) SPECIAL CIRCLE, THIRUVANANTHAPURAM.** **5. KERALA STATE BEVERAGES (MANUFACTURING AND MARKETING)CORPORATION LIMITED SASTHA GROUP OFFICE COMPLEX, SASTAMANGALAM THIRUVANANTHAPURAM, REPRESENTED BY THE SECRETARY.** **R5 BY ADV. SRI.C.S.AJITH PRAKASH BY SRI.ELVIN PETER BY GOVERNMENT PLEADER SMT.K.T.LILLY** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 17-12-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **WP(C).NO. 31659 OF 2008 (R)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: TRUE COPY OF THE LICENSE ISSUED IN RESPECT OF ACTIVITY OF COMPOUNDING AND BLENDING AS PER THE KERALA FOREIGN LIQUOR (COMPOUNDING BLENDING AND BOTTLING) RULES, 1975** **EXT.P2: TRUE COPY OF THE LICENSE ISSUED FOR BOTTLING OF LIQUORS UNDER THE KERALA FOREIGN LIQUOR (COMPOUNDING BLENDING AND BOTTLING) RULES, 1975** **EXT.P3: TRUE COPY OF THE NOTICE ISSUED UNDER SECTION 45A DATED 2.9.2005** **EXT.P4: TRUE COPY OF THE ORDER OF THE ASSESSING AUTHORITY DATED 31.10.2005 FOR THE ASSESSMENT YEAR 2000-2001** **EXT.P5: TRUE COPY OF THE DEMAND NOTICE FOR TURNOVER TAX IN PURSUANCE OF EXHIBIT P4** **EXT.P6: TRUE COPY OF THE DEMAND NOTICE FOR INTEREST IN PURSUANCE OF EXHIBNITP4** ## **EXT.P7: TRUE COPY OF THE ORDER DATED 15.6.2006 OF THE ASSESSING AUTHORITY** **EXT.P8: TRUE COPY OF THE DEMAND NOTICE FOR TURNOVER TAX** **EXT.P9: TRUE COPY OF THE DEMAND NOTICE FOR INTEREST** **EXT.P10: TRUE COPY OF THE APPEAL MEMORANDUM** **EXT.P11: A TRUE COPY OF THE ORDER DATED 28.10.2006 OF THE DY COMMISSIONER(APPEALS)** **EXT.P12: TRUE COPY OF THE NOTICE DATED 5.6.2006** **EXT.P13:TRUE COPY OF THE REPLY OF THE PETITIONER DT.20.6.2008** **EXT.P14:TRUE COPY OF THE ORDER DATED 15.6.2006 OF THE ASSESSING AUTHORITY FOR THE ASSESSMENT YEAR 2001-2002** **EXT.P14(A):TRUE COPY OF THE DEMAND NOTICE FOR TURNOVER TAX ASSESSED** **EXT.P14(B):TRUE COPY OF THE DEMAND NOTICE FOR INTEREST** **EXT.P15:TRUE COPY OF THE ORDER DATED 26.6.2006 OF THE ASSESSING AUTHORITY** **EXT.P15(A):TRUE COPY OF THE DEMAND NOTICE DATED DT.28.6.2006 TURNOVER TAX ASSESSED** ## **WP(C).NO. 31659 OF 2008 (R)** **EXT.P15(B):TRUE COPY OF THE DEMAND NOTICE DATED 28.6.2006 FOR INTEREST** **EXT.P16:TRUE COPY OF THE APPEAL MEMORANDUM** **EXT.P17:TRUE COPY OF THE ORDER DATED 28.10.2006 OF THE DY COMMISSIONER (APPEALS)** **EXT.P18:TRUE COPY OF THE ASSESSMENT ORDER DATED 10.7.2006 FOR THE ASSESSMENT YEAR 2002-2003** **EXT.P18(A):TRUE COPY OF THE DEMAND NOTICE FOR TURNOVER TAX DT.14.7.2006** **EXT.P18(B):TRUE COPY OF THE DEMAND NOTICE FOR INTEREST DT.14.7.2006** ## **EXT.P19: TRUE COPY OF THE APPEAL MEMORANDUM** **EXT.P20:TRUE COPY OF THE ORDER OF THE DY COMMISSIONER (APPEALS) DATED 28.10.2006** **EXT.P21:TRUE COPY OF THE REVISED RETURN FOR THE YEAR 2000-01 FILED ON 16.8.2005** **EXT.P22:TRUE COPY OF THE REVISED RETURN FOR THE YEAR 2001-02 FILED ON 16.8.2005** **EXT.P23:TRUE COPY OF THE REVISED RETURN FOR THE YEAR 2002-2003 FILED ON 16.8.2005** **EXT.P24:TRUE COPY OF THE STATEMENT SHOWING THE DETAILS OF THE AMOUNT DUE AND AMOUNT REMITTED FROM THE ASSESSMENT YEAR ENDED 1998-99 TO 2003-04** **EXT.P25:TRUE COPY OF THE DETAILS OF THE AMOUNT REMITTED DURING THE RESPECTIVE YEARS WITH BANK DETAILS** **EXT.P26:TRUE COPY OF THE ORDER NO.GO (RT) NO.760/2006/TD DATED 5.12.2006** **EXT.P27:TRUE COPY OF THE STATEMENT INDICATING THE DETAILS OF PAYMENT** **EXT.P28: TRUE COPY OF THE COMMUNICATION OF 4TH RESPONDENT GIVING THE TOTAL AMOUNT DUE INCLUDING INTEREST UNDER SECTION 23(3) AND 23(3A) FROM THE ASSESSMENT YEAR COMMENCING 1998-99** **EXT.P29:TRUE COPY OF THE ORDER OF THE SALES TAX TRIBUNAL IN THE CASE OF MESSRS.ELITE SUPER MARKET AND BEVERAGES CO.** ## **RESPONDENTS' EXHIBITS: NIL** **//TRUE COPY//** **P A TO JUDGE** # **WP(C).NO. 31659 OF 2008 (R)** ## **A.K.JAYASANKARAN NAMBIAR, J.** **.............................................................** W.P.(C).No.31659 of 2008 **.............................................................** Dated this the 17[th] day of December, 2014 ## **J U D G M E N T** The petitioner is a registered dealer engaged in compounding, blending and bottling of Indian Made Foreign Liquor (IMFL). The issue arising in the instant case pertains to the liability of the petitioner to pay turnover tax on that portion of its turnover which comprises of excise duty/privilege price in respect of the sale of IMFL. The petitioner essentially has two contentions namely, that they are not a distillery for the purposes of Section 5 (2C) of the Kerala General Sales Tax Act and, hence, they will not be liable to pay turnover tax as contemplated under that provision which is applicable only to distilleries. The other contention is with regard to the payments already made by the petitioner towards turnover tax. It is the case of the petitioner that while it had effected payments towards turnover tax liability, during the pendency of litigation on the issue of whether the amounts collected by way of privilege price by the Kerala State Beverages Corporation would form part of the turnover on which turnover tax had to be paid, pursuant to a resolution of the said dispute through the decision of the Supreme Court in **State of Kerala and Others** 2 W.P.(C).No.31659 of 2008 ## **v. Maharashtra Distilleries Ltd. And Others [2005 Vol.141** **STC 358]** and a clarification by the Supreme Court that no turnover tax would be payable on amounts paid by the Kerala State Beverages Corporation to the Treasury by way of privilege fee up to 05.01.1999, the respondents had appropriated the payments made by it in the interregnum, towards interest under Section 23 (3)/23(3A) of the Kerala General Sales Tax Act in terms of Section 55 C thereof. This resulted in the amounts paid by the petitioner, towards tax that was not due from it, being adjusted towards interest accrued on the said tax liability and not being available for set off against the tax liability that was attracted to the petitioner for the period after 05.01.1999. The petitioner also has a case that the compounding and blending operations carried on by it do not amount to a process of manufacture for the purposes of attracting the liability to turnover tax. In the writ petition, the assessment proceedings for the assessment years 2000-2001, 2001-2002 and 2002-2003 are stated to have culminated in Exts.P11, P17 and P20 orders of the 3[rd] respondent Appellate Authority. These orders are impugned in the writ petition that was filed in 2008 challenging, inter alia, the amendments to the Kerala General Sales Tax Act and Abkari Act that are brought in 2003/2004. 3 W.P.(C).No.31659 of 2008 2. It is seen that by a judgment dated 22.01.2010 in W.A.No.1225 of 2007 and connected cases a Division Bench of this Court has rejected the challenge to the amendments in the Kerala General Sales Tax Act and the Abkari Act except to the extent of holding the retrospectivity given to those provisions for the period prior to 05.01.1999 as illegal. It is also brought to my notice, by counsel for the petitioner, that against Exts.P11, P17 and P20 orders, he has already pursued his statutory remedy under the Kerala General Sales Tax Act and the said proceedings have culminated in the judgment of this Court in revisions filed against the orders of the Tribunal. Under the said circumstances, and in view of the fact that the petitioner has already exhausted his statutory remedies under the Act against Exts. P11, P17 and P20 orders during the pendency of this writ petition, the writ petition, in its challenge to the amendments to the Kerala General Sales Tax Act and Abkari Act, is disposed following the judgment dated 22.01.2010 of the Division Bench in W.A.No.1225 of 2007 and connected cases. ## **A.K.JAYASANKARAN NAMBIAR JUDGE** mns W.P.(C).No.31659 of 2008 4